Malaysia expects to touch 5% econ growth in 2011

AnkurRelia

KUALA LUMPUR (MarketWatch) -- Malaysia's export-driven economy is likely to expand 5% this year, but a serious downturn in the global economy will hurt its prospects for further growth, Prime Minister Najib Razak said Tuesday.

Sagging exports in recent months, caused by weaker demand from developed countries, have slowed Malaysia's economy. It expanded 4.0% on year in the second quarter of 2011, compared with 4.9% in the first quarter.

Najib, who is also the finance minister, also said the government remains committed to gradually reducing subsidies for commodities like gasoline, diesel, sugar, flour, and for electricity.

The Malaysian government's subsidy burden was MYR24.93 billion in 2010, or 16.4% of the gross domestic product, the finance ministry says.

Najib added that the government aims to cut is fiscal deficit to 3.0% in the next few years, with the target for this year 5.4%, compared with 5.6% in 2010.

Apart from reducing subsidies, the government intends to introduce goods and services tax to achieve its deficit reduction goals.

"The question is the timing," he said.

The tax will probably be introduced after the next national elections, he said

The government has until March 2013 to call for general elections. "It is bit of a guessing game...It is one of those thing where you must get the timing right," he said.

Malaysia, already a major market for Islamic finance, is setting up a large Islamic bank, with a paid-up capital of at least $1 billion.

"I just got confirmation of a major commitment from one of the Middle Eastern countries. So we are putting together this because we believe that Islamic finance has a bright future and Malaysia is in the forefront," he said.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.